As we continue to see media reports of the spread of coronavirus illness, businesses could also face claims that they allegedly failed to exercise reasonable care in the handling of or warning against coronavirus exposure. Providers of transportation, hospitality services and retail establishments, and healthcare services may be impacted.
General liability policies cover liability for bodily injury and property damage, and primary Commercial General Liability policies will usually provide a legal defense against certain covered claims. Insurers with a duty to defend may still be charged with such obligation if there is even a possibility of coverage for the underlying liability as policy exclusions for pollution and bacteria infections may not be deemed applicable unless such terms include viral infection exclusions. Georgia courts have consistently held that exclusions to an insurance policy require narrow construction on the theory that the insurer, having affirmatively expressed coverage through broad promises, assumes a duty to define any limitations on that coverage in clear and explicit terms. RLI Ins. Co. v. Highlands on Ponce, LLC, 280 Ga. App. 798, 802, 635 S.E.2d 168 (2006); Western Pacific Mutual Ins. Co. v. Davies, 267 Ga. App. 675, 680, 601 S.E.2d 363 (2004); Kerr-McGee Corp. v. Georgia Casualty & Surety Co., 256 Ga. App. 458, 460, 568 S.E.2d 484 (2002).
Business Interruption Insurance
Business interruption insurance is typically purchased as part of a company’s commercial property insurance policy and is intended to protect businesses against income losses sustained as a result of disruptions to business operations. Contingent business interruption coverage similarly provides insurance for financial losses resulting from disruptions to a business’s customers or suppliers, usually requiring that the underlying cause of damage to the customer or supplier be of a type covered with respect to the business’s own property. Typically these types of coverage require physical damage to property to be triggered. But the issue of what constitutes physical damage is not always clear as shown here in the 11th Circuit and elsewhere. See Mama Jo’s, Inc. v. Sparta Ins. Co., 2018 U.S. Dist. LEXIS 201852 (S.D. Fla. Jun 11, 2018) (holding a restaurant did not sustain direct physical loss when dust and debris from nearby roadwork could be remediated by cleaning); Mastellone v. Lightning Rod Mut. Ins. Co., 884 N.E.2d 1130 (Ohio Ct. App. 2008) (finding that mold which could be removed by cleaning was not physical damage, as it did not alter or impact the structural integrity of the building’s siding); Universal Image Prods. v. Chubb Corp., 703 F. Supp. 2d 705 (E.D. Mich. 2010) (holding that intangible harms such as odors or the presence of mold and bacteria in an HVAC system did not constitute physical damage to property); Great N. Ins. Co. v. Benjamin Franklin Fed. Sav. & Loan Ass’n, 793 F. Supp. 259 (D. Or. 1990) (finding that asbestos contamination was not a physical loss, as the building remained unchanged), aff’d, 953 F.2d 1387 (9th Cir. 1992).
Viruses and disease are typically not an insured peril unless added by endorsement. Most policies generally exclude loss caused by or resulting from any virus, bacterium, or other microorganism that induces or is capable of inducing physical distress, illness, or disease.
Standard business interruption policies typically exclude viruses and bacteria and/or communicable disease. However, in response to past outbreaks, some insurers developed specialty insurance to respond. In Georgia, coverage endorsements may be available for businesses which may provide for losses in an effort to protect Georgia businesses.
On March 17, 2020 Georgia’s Insurance Commissioner issued BULLETIN 20-EX-3 which provides in pertinent part as follows:
The Georgia Department of lnsurance became aware that in early February 2020, Insurance Services Office, Inc. developed two new endorsement forms relating to business interruption insurance and COVID-19. These forms provide coverage for actual loss of business income and extra expenses ·caused by a government order closing the insured’s premises or quarantining all or part of the premises and from government suspension of some modes of public transportation. If dependent properties are included in the coverage, such as a supplier’s or· customer’s premises, then the coverage applies to the dependent property as well. The forms were not filed with the Georgia Department of lnsurance and will not be added to ISO’s form portfolio. Upon learning of these forms, the Department elected to offer expedited review processes for these coverages. The Department intends to remove any barriers to insurers offering coverages that may protect Georgia businesses during this unprecedented Public Health Crisis.
The implication of coverage endorsements for business interruption in light of the COVID-19 outbreak is certainly an emerging issue and the full extent of potential claims, coverage, and the landscape of legal issues may be numerous.
This correspondence should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult with us concerning any particular legal questions.